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Oct 2 2017, 06:30 IST/BST
We are upgrading Kingfisher to ‘Outperform’. The recent slide in the share price reflects the operational challenges facing the business and a lack of belief in the ONE Kingfisher strategy. Our scenario analysis, however, highlights (i) the attractiveness of the current valuation, (ii) the significant capacity for capital returns over the coming three years (even in a bear case scenario) and (iii) now zero expectation regarding the success of ONE Kingfisher. According to our base case, the company could return up to 42% of the current market cap over the coming three years. This is not reflected in the current share price. We believe the stock is worth up to 390p, over 30% above current levels.